Federal agency rules Trump’s D.C. hotel lease is in ‘full compliance’

Republican presidential candidate Donald Trump, center, and his family cut a ribbon during the grand opening of the Trump International Hotel in D.C. on Oct. 26. (Jabin Botsford/The Washington Post)

Government officials overseeing the Trump International Hotel’s lease with the federal government have determined the deal is in “full compliance” despite a clause in the agreement barring any “elected official of the government of the United States” from deriving “any benefit.”

In a Thursday letter to Eric Trump, the president’s son now overseeing the hotel, the project’s contracting officer found the company met the terms of the lease because the president had resigned from a formal position with the company and the organization had restructured an internal operating agreement so he received no direct proceeds from the D.C. hotel business while in office.

“In other words, during his term in office, the president will not receive any distributions from the trust that would have been generated from the hotel,” said the contracting officer, Kevin M. Terry.

Terry also praised the project for turning a partly empty government office building into a hotel that had already generated $5.1 million for the government by the time it opened in the fall.

“Thus the lease turned a building that had been costing taxpayers millions of dollars per year into a revenue-generating asset,” Terry wrote.

The announcement by the General Services Administration allows Trump’s company, which he still owns, to continue to benefit from a contract ultimately overseen by his administration, a situation that ethical experts have called unprecedented and a conflict of interest that puts the president’s personal financial situation ahead of taxpayers.

Trump signed a 60-year lease for the government-owned Old Post Office Pavilion on Pennsylvania Avenue in 2013, then spent more than $200 million turning the project into a luxury hotel.

Since the election, Democrats on Capitol Hill have constantly pressed the agency to address concerns raised by Trump’s profiting from the lease deal.

“This decision allows profits to be reinvested back into the hotel so Donald Trump can reap the financial benefits when he leaves the White House,” they wrote. “This is exactly what the lease provision was supposed to prevent.”

Since Trump took office, GSA officials and Trump Organization representatives have been negotiating changes to the company’s corporate structure and landed on an agreement in which the president would still profit from the hotel but not receive those profits until he leaves office.

Trump put his ownership stake in the project into a trust, the Donald J. Trump Revocable Trust, controlled by his two adult sons and Allen Weisselberg, a longtime executive at his company. This is a step far short of a blind trust, in which assets are independently managed — a structure previous presidents employed.

However the Trump Organization also agreed not to send any of the earnings from the hotel company to the president’s trust until he leaves office, writing to the agency to say that it would “not make any distributions to DJT Holdings LLC or to any other entity in which President Trump has a direct, indirect or beneficial interest” until then.

Some members of Congress worry that Trump could appoint new leaders who will renegotiate the terms of the lease to eliminate any legal entanglements, especially after a civil servant overseeing public buildings for the agency, Norman Dong, announced his departure recently.

During the week of Trump’s inauguration, leading congressional Democrats released data showing that Trump’s hotel lost more than $1.1 million in the first two months of operations and said it raised untenable conflicts of interest.

More recently DeFazio and Rep. Hank Johnson (D-Ga.) wrote to the GSA’s inspector general, Carol F. Ochoa, urging her to launch an investigation. This week Ochoa demurred, writing March 17 that she will “continue to monitor” the GSA’s management of the lease and “will remain alert to any irregularities” but saying nothing about an investigation.

Left-leaning advocacy group Public Citizen said the GSA’s actions weren’t nearly enough to avoid a lease violation, saying “the GSA’s legal analysis would get a first-year law student kicked out of law school.”

“Handing the ownership stake over to a trust owned by the president and delaying pay out of profits does nothing to change those central facts and does not cure the violation of the plain terms of the lease,” the group said in a statement

The Trump Organization issued a statement thanking the GSA “for their diligent review of this matter.”

“We are immensely proud of this property and look forward to providing our guests with an unrivaled luxury experience for years to come,” the statement said.

Trump has not yet appointed an administrator for the GSA. Agency veteran Timothy Horne is serving as acting administrator.

Jonathan O'Connell covers economic development with a focus on commercial real estate and the Trump Organization. He has written extensively about Donald Trump's business, including how his D.C. hotel has affected Washington and what Trump hotels will mean to the Mississippi Delta. He joined The Washington Post in 2010.